Macro Observations

What happened after Powell spoke in December wasn’t as much about economic dynamics as it was about the wealth effect. By igniting a huge rally in stocks, the Fed has effectively liquified the system, not by printing dollars this time, but by blowing up brokerage statement balances. In short, it’s the wealth effect that’s been driving higher inflation. Therefore, it makes the most sense that if you want to reverse the rise in inflation, you have to reverse the wealth effect.

Inflation is far from the only consequential left tail risk that’s out there right now. In fact, I’d argue that it’s not even the biggest risk factor facing investors right now. I’ve talked about preparing for the credit event for a while. I think it might finally be getting close. Let’s run down the evidence piece by piece.

Gold prices have spent a good chunk of 2024 setting a string of new all-time highs. There are a few reasons why this could be happening, but I think three of them stand out above all others. To be clear, investing in gold miner stocks is not the same thing as investing in gold. Gold miners are companies with revenues and cash flows and profits and losses. That could make gold miner stocks kind of a leveraged play on gold.